The Trump administration’s latest threat against Harvard to revoke its tax-exempt status is an unprecedented move that would certainly face legal challenge but could have devastating effects on the university if it is allowed to go forward.
The Treasury Department on Wednesday asked the IRS to rescind Harvard’s status, The Washington Post reported, after President Trump suggested the idea in a social media post.
The move is the latest Trump administration broadside against America’s oldest school after it rejected a list of policy demands from the White House, throwing its federal funding into question.
“It would decimate Harvard. Quite frankly, it’s hard to imagine how Harvard could operate in any semblance of its current self,” said Katharine Meyer, a fellow in the Brown Center on Education Policy at the Brookings Institution.
Trump threatened Harvard’s tax exemption after the university refused to go along with the administration’s demands for the Ivy League school to change policies such as its hiring and admissions processes, eliminating diversity, equity and inclusion (DEI) initiatives, and reorganizing its leadership.
The Trump administration also promptly took away $2 billion in federal funding, and Homeland Security Secretary Kristi Noem has threatened to cut off its supply of foreign student visas.
“Perhaps Harvard should lose its Tax Exempt Status and be Taxed as a Political Entity if it keeps pushing political, ideological, and terrorist inspired/supporting ‘Sickness?’” Trump wrote in a Tuesday Truth Social post. “Remember, Tax Exempt Status is totally contingent on acting in the PUBLIC INTEREST!”
A spokesperson for Harvard said in a statement to The Hill, “There is no legal basis to rescind Harvard’s tax-exempt status.”
“Such an unprecedented action would endanger our ability to carry out our educational mission. It would result in diminished financial aid for students, abandonment of critical medical research programs, and lost opportunities for innovation. The unlawful use of this instrument more broadly would have grave consequences for the future of higher education in America,” the spokesperson added.
Tax-exempt designation by the IRS is hard to get rid of — and the agency is supposed to be free of political influence.
“If [Trump] actually asked, or anyone in the White House did, it’s illegal and would violate a provision of the Internal Revenue Code that imposes criminal penalties,” said Ellen Aprill, senior scholar in residence at the Lowell Milken Center for Philanthropy and Nonprofits at the University of California, Los Angeles Law School.
But if procedure is followed properly, “there are many, many steps in any revocation … And I would expect it to be a long process,” Aprill added.
An IRS investigation into violations by Harvard of its 501(c)(3) status would take months, and an organization typically has the opportunity to fix whatever violations are found.
And if the IRS goes forward with the revocation, Harvard would be able to challenge it in court.
Only one higher education institution has lost its tax-exemption status before. In the 1980s, Bob Jones University saw its status taken away because it would not allow students in interracial marriages to be admitted.
“There is a statement in the case that a decision that a given institution is not charitable should be made only where there can be no doubt that the activity involved is contrary to a fundamental public policy. And the Trump position that DEI is illegal is not a long-standing position. It was legal until he got inaugurated a few short months ago,” Aprill said.
Trump has rescinded millions of dollars in federal funding to multiple universities over alleged inaction on antisemitism or violations in their policies about transgender athletes.
While civil rights investigations normally have a long process that gives schools time to fix the problems, the Trump administration has taken away funding immediately with no recourse.
“There’s a long process, and the administration seems intent on ignoring all of that,” said Steven Bloom, assistant vice president of government relations at the American Council on Education.
“It’s likely to send a chilling or have a chilling effect across higher education, but not just higher ed,” Bloom said, pointing out other types of nonprofits such as ones in the climate and sustainability space or diversity, equity and inclusion that the Trump administration might target.
“There are lots of organizations, tax exempt organizations, outside of higher ed that are engaged in activity that in a normal world, no one would question. They may not agree with it, but they certainly wouldn’t question pulling their tax exemption. But in this world, that could happen … They’re all going to be worried about all this,” he added.
Bloomberg estimated in 2024 that Harvard has $465 million in tax benefits.
Any hope to make up the amount through donations would face a steep road as donors could no longer use such gifts as a tax write-off.
And although Harvard is the richest university in the world with a $53 billion endowment, much of that money is legally obligated to certain programs and cannot be moved around easily. The parts of the endowment that generate revenue would also then be subject to taxes.
“It would impact every portion of the institution currently” said Wil Del Pilar, senior vice president of EdTrust, pointing out Harvard recently made more students eligible for university financial aid.
In March, Harvard announced students from families making less than $200,000 would get to go to there tuition free.
“If they lost their tax exempt status, that would impact their ability to pay for maintenance on the campus and that would impact their ability to award financial aid,” Del Pilar said. “That would impact their ability to hire faculty. It would impact their ability to fund research.”
“They would have to be a, become a, for-profit model in terms of the way they operated,” he added. “If you’re creating intellectual property, they would have to put that on the market. And currently, a lot of that is public good, because it’s funded with public research funding. … They would have to monetize in ways that they currently don’t, and so, I think it would have a trickle down effect on especially medical advances, technological advances and all the research that they do that has a broader benefit to society.”
